The crypto world was in turmoil on Tuesday night, confused by words used in a government circular that said a bill to regulate the sector will be tabled in the upcoming winter session of Parliament.
That initial panic appears to be over and cryptocurrencies are slowly recovering from the initial crash. Industry stakeholders are now trying to figure out what is in store. The bill is intended to regulate cryptocurrencies and bring about structure to trading in a bid to ensure that cryptos and blockchain technology are not misused.
On a day when all India can talk about is cryptocurrencies, WazirX Co-founder Nischal Shetty spoke to Moneycontrol. In his view, a ban on cryptocurrencies would be a wrong move, causing India to lose out on a $3-trillion opportunity.
The industry is also more optimistic this time around because representatives were invited to discuss the functioning of the industry for the first time ever in a meeting held with the parliamentary standing committee on finance on November 15.
With more clarity awaited, Shetty said that as of now the industry only expects cryptocurrencies to be treated as an asset and to be regulated. Edited excerpts.
Keeping the wording of the bill aside, what is the industry expecting from the bill?
While the description of the draft bill appears to be the same as in January 2021, several noteworthy events have occurred since. First, the parliamentary standing committee invited a public consultation, and then our prime minister himself came forward to call for crypto regulations in India. Plus, on several occasions, (former economic affairs secretary) Subhash Chandra Garg (head of a finance ministry appointed panel to look into cryptocurrencies) has also mentioned that there should be a prohibition on the “currency” use case of crypto. Crypto can be classified as currency, asset, utility, or security. So “currency” is one of the many use cases of crypto. As an industry, we’re in sync with the fact that the rupee is the only legal tender in India, and about crypto being an asset/utility which people buy and sell.
That being said, let’s respectfully wait to find out more about the draft bill to be tabled in the Parliament.
As we are learning, the government may not ban cryptocurrencies but look for regulation. Your comments?
It will be a welcome move. We understand the concerns and those can be curtailed via regulations, that is the middle path that we have been discussing and other countries are also adopting. This will be great news that the Indian government is also thinking in the same direction.
When the government uses the term ‘private cryptocurrencies’, what is it referring to?
It is hard to comprehend what the government means by private cryptocurrencies. Bitcoin, ether, etc., are public crypto built on public blockchains and have their own specific use cases. They are needed to run smart contracts and write to the distributed ledger that they’re built on top of. People cannot use rupees or dollars to pay for fees on the bitcoin or ethereum blockchain.
The general understanding is that private cryptocurrency refers to digital coins that are not backed directly by the government. If we go by this and there is a ban on it, what does it mean for the industry?
If we go by that, it’s like banning all the websites built by businesses, communities but not owned by the government. It raises a very simple question: What happens to the decentralised social networks, applications, NFTs (non-fungible tokens)? Every such innovation needs crypto.
This whole blanket ban approach to a technology that is so vast is not the right move and I believe the government will most likely pick and choose and probably target any crypto which is trying to compete as a currency and strike that off the market, which will allow people to get into other coins like bitcoin, etc.
What will the said ban mean for India in the long run?
If we do think of a ban, we will be the first nation to do it. Secondly, we will lose out the whole $3-trillion market opportunity and there will be a massive brain drain. With the work-from-home culture and remote working, every startup will move out of India.
We will also not see any skill development. Blockchain is one of the fastest growing job markets; if the ban comes in, India will not learn going forward. More importantly, what happens to the 2 crore people who own $4-5 billion worth of crypto?
There was panic selling after the bill’s wording came out last night. What would you say to investors at a time when there is confusion over what to expect?
Yesterday night, we witnessed a huge panic selling in our rupee market on WazirX driven by the news of the crypto bill being introduced in the winter session of Parliament. The description of the note is the same as in January 2021 which induced immense fear in the minds of investors. The process of crypto regulation is in the works, and we need to have faith in our lawmakers. We request our users to not be afraid and sell in a panic.
We are seeing a recovery now and it’s down about 7 percent. By the end of the day, it should be back to normal. We also saw the highest number of users on the platform after the news last evening.